State Reps. Josh Kail (R-Beaver/Washington) and Kristin Marcell (R-Bucks County) recently issued a memo to all members of the House of Representatives seeking co-sponsors for legislation that would uncap businesses’ Net Operating Loss (NOL) carryforward deductions.
The bill would increase the NOL carryover limit to 100 percent of taxable income by 2025. Currently, the federal limit is 80 percent of taxable income while Pennsylvania caps it a 40 percent.
Only one other state does not permit businesses to carryover net operating losses consistent with the federal limit.
“Making Pennsylvania business-friendly is not just a goal; it’s a fundamental necessity, which is why I am calling for an end to the start-up penalty,” Kail said on Monday. “My legislation promotes a tax structure that is beneficial for entrepreneurs and cyclical businesses, both of which are critical to a healthy economy. By uncapping NOL deductions, we achieve an environment that welcomes innovation and fosters opportunities for family-sustaining jobs. My legislation establishes hope for enhancing the quality of life for all residents of the commonwealth.”
The cap is a penalty for start-ups, which likely experience losses in their first few years, and manufacturers in commodity markets that experience major fluctuations in profits and losses, Kail said.